Tax Audit Late Fee: The introduction of the Income-tax Act, 2025 has created considerable confusion about the penalty or fee applicable when a tax audit report is filed late. One major question is whether a taxpayer whose tax audit relates to FY 2025-26 will have to pay ₹75,000 or ₹1,50,000 if the report is filed after the due date.
The confusion mainly exists because the new Income-tax Act, 2025 came into effect from 1 April 2026. At the same time, tax audits relating to FY 2025-26 are connected with AY 2026-27. Therefore, it is important to understand which law governs the audit before deciding what consequence may arise from a delay.
FY 2025-26 Continues Under the Old Income-tax Act
FY 2025-26 covers the period from 1 April 2025 to 31 March 2026. The corresponding assessment year is AY 2026-27. Since the income relates to a financial year that falls under the earlier tax framework, the tax audit requirements for this year continue to be governed by the Income-tax Act, 1961.
The tax audit requirement for FY 2025-26 is therefore covered by Section 44AB of the Income-tax Act, 1961. The applicable tax audit forms remain Form 3CA or Form 3CB along with Form 3CD, depending on the circumstances of the taxpayer. The fact that the report may actually be uploaded after 1 April 2026 does not by itself shift the audit into the new law.
Why the New ₹75,000 Fee Is Creating Confusion
The Income-tax Act, 2025 introduces a new mechanism for failure to complete the required tax audit and furnish the audit report within the prescribed time. Section 428 provides for a specified fee where the requirements relating to tax audit are not complied with as prescribed under the new Act.
Under this new framework, the prescribed amount is ₹75,000 where the delay is up to one month. If the delay goes beyond one month, the prescribed amount increases to ₹1,50,000. This has led to statements that every late tax audit report after 1 April 2026 will automatically attract a fee of ₹75,000.
The New Fee Does Not Apply to FY 2025-26
For FY 2025-26, the new Section 428 fee should not be treated as automatically applicable merely because the tax audit report is filed after 1 April 2026. The relevant issue is the tax year to which the audit relates, rather than simply the date on which the report is uploaded.
FY 2025-26 relates to AY 2026-27 and continues under the Income-tax Act, 1961. Therefore, a delay in filing the tax audit report for this year falls under the old legal framework. The transition provisions are important in determining this position.
Section 271B Applies to the Old Regime
For FY 2025-26, the consequence of failure to comply with the tax audit requirement is dealt with under Section 271B of the Income-tax Act, 1961. This provision relates to failure to get accounts audited or failure to furnish the audit report as required under Section 44AB.
Section 271B does not prescribe an automatic fixed penalty of ₹75,000 for a short delay. Instead, the penalty can generally be calculated at 0.5% of total sales, turnover or gross receipts, subject to a maximum of ₹1,50,000. Therefore, the ₹1,50,000 figure under the old provision is a statutory ceiling and not necessarily the amount payable in every case.
Section 273B Provides an Important Protection
Another important difference is the treatment of reasonable cause. Section 273B provides relief from certain penalties where the taxpayer can establish that there was a reasonable cause for the failure. Section 271B is among the provisions covered by this protection.
This means that a taxpayer should not simply assume that a late tax audit report for FY 2025-26 will automatically result in a fixed penalty. The facts and circumstances behind the delay can be relevant. The reasonable-cause provisions should therefore also be considered when examining a Section 271B penalty.
What Changes From Tax Year 2026-27?
The position changes for Tax Year 2026-27. This tax year begins on 1 April 2026 and ends on 31 March 2027. It falls under the Income-tax Act, 2025 and is therefore subject to the provisions introduced by the new law.
The tax audit requirement under the new framework is provided under Section 63. The corresponding tax audit report is Form No. 26. Where the taxpayer fails to comply with the applicable tax audit requirement within the prescribed period, the new fee mechanism under Section 428 becomes relevant.
How the New ₹75,000 and ₹1,50,000 Fee Works
Under the new framework, the fee is not calculated as a percentage of turnover. Where the delay is up to one month, the prescribed fee is ₹75,000. If the delay goes beyond one month, the prescribed amount becomes ₹1,50,000.
It is also important to understand that ₹75,000 is not a monthly charge. A delay of ten days, twenty days or up to one month falls within the first prescribed slab. Once the delay crosses the specified one-month period, the higher amount of ₹1,50,000 becomes applicable under the new provision.
A Simple Example for FY 2025-26
Consider a taxpayer whose tax audit relates to FY 2025-26 and whose applicable due date is 30 September 2026. If the taxpayer files the audit report on 15 October 2026, the report is late, but the taxpayer should not automatically calculate a ₹75,000 fee under Section 428.
The audit still relates to FY 2025-26 and is governed by the old Act. Therefore, the relevant consequence is the Section 271B penalty framework, subject to the applicable provisions of the Income-tax Act, 1961, including the reasonable-cause protection available under Section 273B.
A Simple Example Under the New Act
Suppose a tax audit relating to Tax Year 2026-27 is required to be completed by 30 September 2027. If the taxpayer submits the required audit report within one month after the prescribed deadline, the new Section 428 fee would fall within the ₹75,000 slab, assuming the provision applies to that case.
If the delay goes beyond one month, the prescribed fee becomes ₹1,50,000. Unlike Section 271B under the old Act, this new fee is not calculated by applying 0.5% to the taxpayer’s turnover or gross receipts.
Why the Difference Between the Two Years Matters
The main source of confusion is the assumption that the new Income-tax Act automatically applies to every tax compliance completed after 1 April 2026. That approach can lead to an incorrect conclusion. The transition between the two laws must be considered based on the relevant tax year and the applicable transitional provisions.
For FY 2025-26, the position remains linked to the Income-tax Act, 1961, Section 44AB and the existing tax audit forms. For Tax Year 2026-27, the new Income-tax Act, 2025, Section 63, Form No. 26 and the Section 428 fee mechanism become relevant.
₹1,50,000 Means Different Things Under the Two Laws
Although the figure of ₹1,50,000 appears under both frameworks, its meaning is different. Under Section 271B of the old Act, ₹1,50,000 represents the maximum penalty, subject to the percentage-based calculation and other applicable provisions.
Under the new Section 428 mechanism, ₹1,50,000 is the prescribed fee once the delay crosses the specified one-month period. It is therefore not correct to treat the two amounts as identical simply because they have the same numerical value.
Final Takeaway
The key point for taxpayers dealing with FY 2025-26 is that a late tax audit report does not automatically result in a ₹75,000 fee under the new Section 428 merely because the filing happens after 1 April 2026. FY 2025-26 corresponds to AY 2026-27 and remains subject to the relevant provisions of the Income-tax Act, 1961.
For Tax Year 2026-27 and subsequent tax years covered by the new Act, the position is different. Section 428 introduces the specified fee structure of ₹75,000 for delay up to one month and ₹1,50,000 thereafter. The new mechanism is separate from the percentage-based penalty framework under Section 271B.
Disclaimer
This article is intended only for general information and educational purposes. Tax laws, rules, notifications, circulars and transition provisions may change or may be interpreted differently depending on the facts of a particular case. Taxpayers and professionals should verify the latest provisions and official clarifications before taking any compliance or tax position. For a specific case, appropriate advice from a qualified tax professional should be obtained.
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